Ping An Bank Co., the least-capitalized among China’s 17 publicly traded lenders, plans to sell 14.8 billion yuan ($2.4 billion) of stock to its controlling shareholder to bolster its financial strength.
Ping An Insurance Group Co. will buy about 1.32 billion shares at 11.17 yuan each in a private placement, the Shenzhen-based insurer said in an exchange filing yesterday. The subscription price is about 1.3 percent higher than Ping An Bank’s Sept. 5 closing value.
The sale, smaller than an earlier announced plan, adds to a round of fundraising by Chinese lenders, which have announced equity and bond sales this year seeking as much as 327 billion yuan as capital rules tighten. Ping An Bank is seeking to bolster its balance sheet and speed up branch expansion to cope with growing competition from rivals such as China Merchants Bank Co. and Industrial Bank Co.
“The new plan is less than the market expected and not enough to completely relieve Ping An Bank’s capital shortage,” said Tang Yayun, a Shanghai-based analyst at Northeast Securities Co., who rates the stock a buy. “It needs to sell more debt to boost supplementary capital, or retain more earnings to meet the new rules.”
The bank’s shareholders in September 2011 approved a plan to raise 20 billion yuan by selling shares to Ping An Insurance. The authorization was extended for a year in 2012 and expired this month.
Banking shares surged in Shanghai today after Money Week reported that the securities regulator has held meetings with banks on allowing them to sell preferred shares. Agricultural Bank of China Ltd. and Shanghai Pudong Development Bank Co. may be the first to issue the securities, the report said.
Ping An Bank rose 6.9 percent, the biggest intraday advance in three weeks, to 11.79 yuan at 10:01 a.m. in Shenzhen. Ping An Insurance gained 2.7 percent to 36.75 yuan in Shanghai.
The share sale is awaiting regulatory approval, Ping An Insurance said. The transaction will help the bank boost its capital adequacy ratios to meet “increasingly strict” capital requirements from the China Banking Regulatory Commission, the Shenzhen-based lender said in a separate statement.
It will also help the bank handle risk in a fast-changing domestic and external economic environment, Ping An Bank said.
Ping An Insurance is buying the new shares to accelerate growth in its banking business, and to improve cross-selling between its insurance, banking and investment arms, China’s second-biggest insurer said. The stake held by the company and its affiliates would rise to 59 percent from about 52 percent.
Merchants Bank, the nation’s sixth-largest lender by market value, said Sept. 4 it raised 27.5 billion yuan in the Shanghai portion of a rights offer, paving the way for it to complete the world’s third-largest share sale this year.
The share sale would help improve the bank’s capital adequacy ratio to 9.97 percent at the end of the year, according to Ping An Insurance, which cited unidentified market analysts. The lender’s core capital adequacy ratio may increase to 8.83 percent, the parent company said.
Ping An Bank said it targets a minimum capital adequacy ratio of 10.5 percent between 2013 and 2016, with a core tier-1 ratio of 8.5 percent at least.
Its capital adequacy ratio fell to 8.78 percent as of June 30, and its core tier-1 ratio stood at 7.29 percent. Both measures ranked the lowest among the nation’s listed lenders.
Under capital rules that took effect in China Jan. 1, non-systemically important lenders such as Ping An Bank must have a minimum core tier-1 ratio of 5.5 percent, a tier-1 ratio of 6.5 percent and a total ratio of 8.5 percent by the end of 2013. Those levels will rise by 0.4 percentage point a year for the following five years.
The deal will need the approval of Ping An Bank shareholders and regulators including the CBRC and China Insurance Regulatory Commission. Ping An Insurance will finance the buyout using internal capital and would be restricted from transferring the new shares for three years.
Ping An Bank shareholders approved a plan in May to issue no more than 50 billion yuan of Tier-2 debt in the next three years, which will further boost its capital ratios, Ping An Insurance said in an e-mailed statement.